OVERVIEW
We're Flooded with Opportunities Right Now

This week, the stock market has had a huge shift. Just a couple of weeks ago, everything seemed to be in free fall, with fear and panic driving nearly every stock lower. People were worried about the job market and whether the Fed was being too strict with its policies. Now, we’ve flipped the script, and instead of constant selling, we’re seeing a rally with stocks starting to push higher and break through important levels.

On Thursday, we got some good news with the release of the Producer Price Index (PPI) report. The PPI basically tells us how much companies are paying for the goods and services they use to run their businesses. It showed that prices went up by 0.2% from the previous month, which was just a little higher than expected, but nothing major. Over the year, prices have gone up by 1.7%, which is exactly what experts thought would happen. This, along with a report from earlier in the week showing that regular consumer prices are cooling off, helped calm fears about inflation getting out of control.

On top of that, there was some new info about the job market. It turns out that more people applied for unemployment benefits than expected last week—about 230,000 people. While this might sound negative- which it definitely is- it means the job market is really cooling off, which is what the Fed needs to see to cut rates. Because Just a few days ago, people thought there was a 50% chance of a small rate cut; now that’s jumped to 87%.

The Fed has been trying to strike a balance between slowing down inflation and not pushing the economy into a recession. But as we’ve seen signs that the labor market is cooling off—like more people filing for unemployment benefits—people are starting to worry that maybe the Fed has gone too far.

If the job market cools too much, it will mean fewer jobs, lower wages, and less spending, which would eventually tip the economy into a recession. So now, there’s a growing concern that the Fed’s aggressive interest rate hikes might have worked a little too well, and instead of just cooling inflation, they might slow the economy down so much that it leads to a recession.

It’s a fine line the Fed is walking—cooling things down just enough without causing a full-blown economic downturn. That’s why every new data point about jobs, inflation, or economic growth gets so intensely scrutinized.

For now, unemployment is still under control, even though it has been steadily rising month over month, currently sitting at 4.2%, which is in line with expectations. This is a manageable level at the moment, but the upward trend is a warning sign of potential economic slowing. The concern is that if unemployment continues to rise or increases too quickly, it may indicate that the Fed's restrictive policies have been too tight, and more drastic action could be required to address this.

This is why the market has priced in a greater likelihood of a 25 bps rate cut instead of 50 bps at next week’s Fed meeting.

Nasdaq

The market continues to show strong momentum, with the QQQ standing out as the leading group across different sectors, driven by large technology stocks. Notably, the QQQ is firmly trading above its point of control (POC) level of $461, which is a bullish indicator. We’re also above all key daily moving averages, further supporting the positive sentiment.

However, there could be some short-term resistance ahead. After four straight sessions of upward movement, the QQQ is now approaching a significant overhead supply level at $474. This zone coincides with a declining level of resistance dating back to the all-time highs in July, so a rejection or at least some consolidation here wouldn't be surprising or unhealthy for the overall trend.

With the upcoming Fed interest rate decision in the next few days, this becomes even more important. The market is currently pricing in a 25-basis point rate cut, which has helped fuel the recent rally. But as the saying goes, "buy the rumor, sell the news." A pullback or sideways movement could happen before the Fed meeting as traders position themselves for the outcome.

In the end, we must take the current data at face value. Individual stocks have been showing positive behavior, and the price and volume profile of the QQQ supports a bullish outlook. The only question is whether we’ll see a continuation of the rally before the Fed's decision or if the market will take a small breather first- both of which are fine for the bull thesis.

S&P Midcap 400

The midcaps are also showing positive signs, having broken out above their recent range in yesterday’s session and now testing the declining 10, 20, and 50-day EMAs in pre-market trading.

However, the volume on yesterday’s move wasn’t as strong as we might have hoped, which means we didn’t see a huge surge in demand. This leaves us wondering if we’ll see a continuation of this upward trend before the Fed's rate decision.

The MDY, representing midcaps, is currently at a bit of a tricky spot. According to the Visible Range Volume Profile (VRVP), there’s a low volume pocket up to $549, where the MDY is trading now. Beyond that, there’s a significant level of overhead supply up to the Point of Control (POC) at $555. This could make it challenging for the MDY to push past this resistance area in the short term.

Russell 2000

The IWM (small caps) looks strong and is in a better position compared to the MDY. The Visible Range Volume Profile (VRVP) indicates that there’s minimal overhead supply until around $217, where we might see some consolidation. First, though, we need to clear the current supply zone at $214 which is where we are currently finding ourselves.

The small caps yesterday had a clear breakout with higher relative volume, although it wasn’t as intense as what we saw with the QQQ. Currently, in pre-market trading, we’re seeing the small caps push above their EMAs, which is a positive sign.

We’ve come across a long list of small caps from our daily market scans that have solid setups or have shown follow-through in their breakouts. This is a key indicator of how the small-cap sector is performing. While using the index as a proxy is helpful, it often lags behind actual market behavior. The individual stock movements give us a clearer, more immediate picture of what's happening in the market.

DAILY FOCUS
Keep It Simple – Follow the Price & Volume

Right now, we’re seeing a fantastic wave of positive action in the market. Breakouts are not just happening; they’re succeeding with strong follow-through. This is a prime opportunity to be risk-on and seize the chances that are unfolding before us.

When you come across a stock with a solid setup, trust your analysis and take the trade. Don’t let doubt hold you back. The market is moving, and you need to move with it. The key here is to manage your risk effectively. Always anticipate that any trade might not go as planned, so cap your downside exposure to under 1% of your total NAV. This approach allows you to be more aggressive in your trades without putting your overall capital at unnecessary risk.

Stay sharp and focus on the price action. Choose your trades wisely and use this momentum to your advantage. The market is showing strength, and it’s your time to capitalize on this opportunity. Be proactive and ready to act on the setups that come your way.

And remember, preparation is everything. Don’t go into a trading session without a plan. Know which stocks you’re watching, your bias for the day, and how you’ll enter a position. This foresight will give you the confidence to trade effectively and avoid the pitfalls of trading blindly.

Embrace the current market strength, stay disciplined, and just let your strategy and the individual stocks you have been tracking guide you.

WATCHLIST
These Stocks Should Explode Soon

SOUN: SoundHound AI, Inc.

• SOUN has been on our radar for several months, especially after its significant rally back in February. Since then, SoundHound AI has been forming a compelling base, showing strong support on its rising 200-EMA.

• This pattern indicates solid accumulation, as we’re seeing a series of higher lows and lower highs. The volatility is contracting, and the trading range is narrowing, setting the stage for a potential breakout.

• The stock is positioned in one of the hottest sectors right now—AI & Tech. Given the strength and momentum of leaders in this space, such as Nvidia and ARM, SOUN looks promising.

• With its current base and the positive sector dynamics, SOUN is primed to enter a Stage 2 uptrend. This type of uptrend can last for months and has the potential for substantial gains, potentially exceeding +100%. Keep an eye on this one, as it could be set for a major move.

SNCR: Synchronoss Technologies, Inc.

• SNCR, a technology stock in the software sector, has been catching our attention recently due to its impressive performance. Since its August earnings report, which featured a massive +640% earnings per share (EPS) beat, SNCR has seen a substantial increase in volume.

• This spike in volume is noteworthy, especially as the stock has been consistently setting higher highs, demonstrating remarkable relative strength despite a broader market sell-off.

• While the fundamentals might not be extraordinary, the momentum and volume surge are significant indicators. The key level to watch today is $14.10. If SNCR breaks through this level and the overall market remains healthy, with high relative volume on the first hourly candle of the breakout, it could be a strong candidate for a long position.

• Keep an eye on this stock, as its current momentum and volume could signal further upside potential.